PILLANI INVESTMENT CORPORATION LTD. vs. I.T.O. AWARD, CALCUTTA & ANR.

CIVIL APPEAL No. 7/1968Supreme Court[1972] 2 S.C.R. 50223 November 1971Bench: 4 JudgesAuthor: S.M. SIKRI, G.K. MITTER, P. JAGANMOHAN REDDY, I.D. DUA PILLANI INVESTMENT CORPORATION LTD.4 pages
AI SummaryDismissed

What were the facts?

The appellant company, Pillani Investment Corporation Ltd., challenged an order dated May 13, 1964, passed by the Income-tax Officer (ITO) proposing to levy additional Super-Tax under Section 23A of the Indian Income-tax Act, 1922. The company argued that this order, if passed, would constitute an assessment or re-assessment within the meaning of Section 34(3) of the Act and would therefore be barred by limitation. The High Court dismissed the company's writ petition, following a previous Supreme Court decision in M. M. Parikh v. Navanagar Transport & Industries. The company appealed to the Supreme Court by special leave, seeking a review of the Parikh's case judgment.

What did the Supreme Court hold?

The Supreme Court held that the plea for review of the judgment in M. M. Parikh's case was rejected. The Court reasoned that the point was unlikely to arise under the Income-tax Act, 1961, as Section 106 of that Act provides a specific limitation period for orders akin to those under Section 23A. Furthermore, the appellant failed to demonstrate that any vital point was overlooked or that the previous judgment was clearly erroneous, as required by the principles in Keshav Mills. The Court also added that the wording of Section 34(3), specifically 'after the expiry of four years from the end of the year in which the income, profits and gains were first assessable,' is not apposite for an order under Section 23A. An order under Section 23A levies super-tax on undistributed profits, which have already been assessed, rather than assessing income itself. The taxable event is the non-distribution of profits, not their initial assessment. Therefore, the limitation period starting from the first assessment of profits would be inappropriate. The Court explicitly stated it was not concerned with whether an order under Section 23A is considered an order of assessment for rectification purposes.

What were the issues?

1. Whether an order under Section 23A of the Indian Income-tax Act, 1922, is an order of assessment or re-assessment within the meaning of Section 34(3) of the Act, and thus subject to the period of limitation prescribed therein? Assessee's Contention: The appellant company argued that an order under Section 23A is an order of assessment or re-assessment and is therefore barred by the limitation period stipulated in Section 34(3). They sought to review the Supreme Court's prior decision in M. M. Parikh's case, contending it was clearly erroneous. Revenue's Contention: The respondent revenue contended that the Court should decline to review its earlier judgment in M. M. Parikh's case because it was not demonstrably erroneous. They relied on the principles laid down in Keshav Mills v. C.I.T. Bombay regarding the review of previous judgments, emphasizing the need for certainty and continuity in law and requiring a clear error to justify a review.

Which sections of the Income-tax Act were involved?

Section 23A,Section 34(3),Section 106

AI-generated summary — verify with the full judgment below

'502 PILLANI INVESTMENT CORPORATION LTD. v. I.T.O. 'A' WARD, CALCUTTA & ANR.

November 23, 1971 {S .. M. S!KRI,, C.J., P. JAGANMOHAN REDDY, I.. D. DUA AND G. K. MITTER, JJ.] Income-tax Act, 19'22, ss. 23A and 34(3)-S. 34(3) whether app/i- .cable to an order un<Jer s. 23A.

Supreme Court-Revietv o/ prerio11s decision when justified. A B The appellant company objected to an order under s. 23A sought to be ·passed against it. by the Income-tax Officer on \he ground that it was an C .order of assessment or re-assessment within the meaning of s. 34(3) of 1he Act ancl'barred by time. The writ petition in the High Court having failed the comP.any by special leave appealed to this Court. A plea was ·made for re,ie\Ving the judgment in Parikh's case in which this Court 'had held that s. 34(3) was not applicable to an order under s. 23A. HELIJ: 1nc pico for review of Parikh's case must be rejected be· cause : (i) The point was not likely to arise under the Income-tax Act. 1961 as s. 106 thereof provides a period of limitation for an order such .as the one in question; (ii) It was not shown that some vital point was not <:onsidered or that the juclgment was clearly erron

The order continues below.

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